USD/JPY Technicals – 1st Weakness seen in rally

January 9, 2013

Daily Chart

USD/JPY showing 1st sign of weakness since the Dec rally which saw price rose from 82.5 to a high of 88.4. Stochastic indicator is hinting to dip below 80, the confirmation for a Sell Signal after entering into “Overbought” region since 13 Dec. What makes the decline all more noteworthy is the fact that it happened on the day which Japan announced they will be purchasing ESM Bonds using their FX Reserves to “stabilize” Yen, which apparently is a new way of saying “weaken”.

We have provided good reasons why selling Yen may not be a good idea previously, and now technicals are pointing in the same direction with the most bearish candlestick setup (relatively speaking) since this rally.

Hourly Chart

The hourly chart is still firmly in the bullish camp though, with price breaking upwards from the downward trending channel , and staying above interim support/resistance of 87.3. 87.7 may provide some resistance while a break below 87.3 opens up 86.9 and subsequently 86.5.

Other Links:

USD/JPY – Japan Announces ESM Bond Purchase
The decline underscores the waning ability of official loan data to capture the scale of debt in the world’s second-largest economy as borrowers and investors turn to less-regulated, higher-return shadow-banking products. The People’s Bank of China is putting greater emphasis on aggregate financing and the International Monetary Fund says the growth of nonbank credit poses “new challenges to financial stability.”

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